Friday
Jul062007
A Comment from William H Clark, Author of the North Dakota Publicly Traded Corporations Act
J. Robert Brown | Friday, July 6, 2007 at 07:50AM I'm surprised that The Race to the Bottom has not been more thoughtful in its analysis of the role of state courts in reincorporation decisions. A few thoughts:
1. Roughly half of publicly traded companies are not incorporated in Delaware. As to those companies, the Delaware courts are irrelevant. And to the extent that judges outside of Delaware can look to Delaware precedent, that holds equally true for judges in North Dakota.
2. The North Dakota statute includes an express provision that it is to be interpreted to enhance the rights of shareholders. That makes the following comment in this journal entry simply wrong on its face: "Shareholders, for example, confront the risk that the North Dakota courts could be even less amendable to their interests than those in Delaware."
3. The federal courts remain a viable option for corporate litigation in most cases, and are often resorted to for litigation outside of Delaware.
4. The June/July 2007 edition of Directorship magazine reports that the legal climate in North Dakota was ranked third in the nation.
5. But the ultimate question for shareholders is "Would you rather have a law that gives you few rights and have to look to the courts for protection, or would you rather have a meaningful set of rights that will reduce the need for litigation?" I think shareholders, upon reflection, will opt for a meaningful set of rights. The reason Delaware has built up such a large body of precedent is because shareholders have had to look to the Delaware courts to protect them because the Delaware law does not.
1. Roughly half of publicly traded companies are not incorporated in Delaware. As to those companies, the Delaware courts are irrelevant. And to the extent that judges outside of Delaware can look to Delaware precedent, that holds equally true for judges in North Dakota.
2. The North Dakota statute includes an express provision that it is to be interpreted to enhance the rights of shareholders. That makes the following comment in this journal entry simply wrong on its face: "Shareholders, for example, confront the risk that the North Dakota courts could be even less amendable to their interests than those in Delaware."
3. The federal courts remain a viable option for corporate litigation in most cases, and are often resorted to for litigation outside of Delaware.
4. The June/July 2007 edition of Directorship magazine reports that the legal climate in North Dakota was ranked third in the nation.
5. But the ultimate question for shareholders is "Would you rather have a law that gives you few rights and have to look to the courts for protection, or would you rather have a meaningful set of rights that will reduce the need for litigation?" I think shareholders, upon reflection, will opt for a meaningful set of rights. The reason Delaware has built up such a large body of precedent is because shareholders have had to look to the Delaware courts to protect them because the Delaware law does not.
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